The WACC is a weighted average of the costs of debt, preferred stock, and common equity. How should the capital structure weights used to calculate the WACC be determined? Would the WACC depend in any way on the size of the capital budget? How might dividend policy affect WACC? Explain

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.